OPT Fair Tax Act Ends FICA Exemption for OPT Workers

(UNITED STATES) A new proposal in the U.S. Senate, called the OPT Fair Tax Act, would change how international students on Optional Practical Training (OPT) are taxed and how much it costs employers to hire them. Right now, many F‑1 students on OPT do not pay FICA payroll taxes for Social Security and Medicare, and their employers do not pay these taxes on their wages either.

If Senate bill S. 2940 becomes law, that special exemption would end. Students would see 7.65% taken from their paychecks in a new payroll tax, and employers would owe the same percentage on top of the salary. For recent graduates already stretched by rent, loans, and visa costs, this would feel like a sudden pay cut, and it could also affect which employers are ready to hire them under OPT.

According to analysis by VisaVerge.com, the OPT Fair Tax Act is part of a wider push to treat OPT workers more like U.S. workers for tax purposes. The bill, introduced by Senator Tom Cotton in September 2025, argues that the current FICA exemption “incentivizes businesses to hire foreign workers” and that removing it would “put American workers first.” The bill has been sent to the Senate Committee on Finance and is not law yet, but many students, families, and employers are already trying to plan for what happens if it passes.

Below is a step‑by‑step look at what this proposal means for three key groups: students already on OPT, students who will soon apply for OPT, and future students still deciding whether to study in the 🇺🇸 United States. For each stage, you’ll find timelines, recommended actions, and what to expect from U.S. authorities and employers if the OPT Fair Tax Act moves forward.

Step 1: Grasping the Basic Change – From FICA Exempt to Fully Taxed

Under current rules, most F‑1 students who are still nonresident aliens for tax purposes do not pay FICA on wages earned through Optional Practical Training. That exemption currently saves:

• 7.65% of wages for the student (6.2% Social Security + 1.45% Medicare)
• 7.65% of wages for the employer

The OPT Fair Tax Act would:

• Treat OPT wages like regular U.S. employment wages
• End the FICA exemption for OPT students
• Require students and employers each to pay 7.65% of wages in payroll tax

Example (impact on a $50,000 salary):

This change would apply to international students from all regions—India, China, Africa, Europe, Latin America, the Middle East, and elsewhere—not just to one nationality.

Step 2: If You’re Already on OPT – What the Next 12–24 Months May Look Like

The bill is still in Congress, so nothing changes until it actually passes and takes effect. Still, plan for two possible timelines if you’re on post‑completion OPT or STEM OPT.

Months 0–6: While the Bill Is Under Debate

• Payroll status stays the same: You continue not paying FICA as long as you meet existing nonresident alien rules.
• Employer costs stay the same: HR departments will likely monitor the bill but typically won’t change paychecks until law takes effect.
• Main action:
  • Start building a 7.65% “buffer” in your budget as if FICA were already deducted.
  • Track the bill’s progress via reliable sources and the official U.S. Congress website.

If the bill stalls or dies, nothing changes. If it advances, you’ll want to be ready.

Months 6–18: If the Bill Passes and Takes Effect

Many tax laws have a future effective date (often the start of a calendar year). If that happens:

• Employer payroll updates: HR/payroll will begin withholding 7.65% FICA from wages once the law’s start date arrives.
• Reduced take‑home pay: Your paycheck could drop by roughly 7.65%, in addition to regular federal and state income taxes.
• Action plan:
  1. Review your pay stub to confirm FICA withholding.
  2. Adjust housing, transportation, and loan payments to align with lower net income.
  3. Consult a tax professional if you’re unsure about tax residency status or any remaining exemptions.

For more details on FICA rules, see the IRS explanation at IRS Topic No. 751.

Step 3: If You’ll Apply for OPT Soon – Planning Backwards from Graduation

If you’re still in school and will apply for OPT, plan across three linked phases: pre‑graduation, OPT application, and first year of work.

3–12 Months Before Graduation: Financial Planning Starts Now

Do the following early:

• Estimate your likely starting salary by field and location.
• Assume a 7.65% FICA deduction when budgeting for living arrangements, food, transport, and loan repayment.
• Talk with your international student office about current OPT rules and any university guidance regarding the proposed tax change.

A conservative budget protects you even if the law never passes.

3–6 Months Before Graduation: Filing Your OPT Application

To work under OPT, most students must file Form I‑765, Application for Employment Authorization with USCIS. The form and instructions are at Form I-765, Application for Employment Authorization.

During this phase:

• USCIS processing:
  • File Form I‑765 with the required fee and documents.
  • If approved, USCIS issues an Employment Authorization Document (EAD).
• Action items:
  • File as early as permitted (up to 90 days before program end date in most cases).
  • Keep copies of all documents.
  • Build a backup timeline in case your EAD arrives later than expected.

The OPT Fair Tax Act does not change the OPT application process or USCIS procedures—only the tax treatment of wages once employed.

First 12 Months of OPT: Watching Employer Reactions

If the exemption ends, employers may react differently:

• Some may keep gross salary the same and absorb the extra 7.65% employer FICA cost.
• Some may reduce offered salaries to keep total hiring costs similar to hiring a U.S. worker.
• Smaller employers with tight budgets might become more selective about hiring OPT students.

Prepare by:

• Considering offers in lower‑cost cities where reduced net pay still covers expenses.
• Being open to remote roles based in more affordable U.S. regions.
• Discussing employer‑sponsored visas (e.g., H‑1B) earlier if a company shows long‑term interest.

USCIS guidance on students and recent graduates is at USCIS — Students and Exchange Visitors.

Step 4: If You’re a Future Student or NRI Family Still Deciding on the U.S.

For prospective students and families abroad, the OPT Fair Tax Act changes the return on investment (ROI) calculus for a U.S. degree.

1–3 Years Before Studying: Comparing Destinations

When comparing the U.S. to Canada, the U.K., Australia, or Europe, include:

• Typically higher U.S. tuition and living costs.
• OPT has been a key element of the study → work → possible green card path.
• With FICA added, net income on OPT falls while costs remain high.

Recommended actions:

• Run side‑by‑side budgets that include tuition, living costs, likely net salary after taxes, and post‑study visa rules.
• Ask universities whether they expect changes in career services or employer interest if the bill passes.
• Consider program length, location, and cost more carefully.

During Applications and Visa Planning

Keep these points in mind:

• OPT may remain available, but financial benefits shrink if FICA applies.
• You may need to show more savings or stronger family support for high‑cost cities.
• Some families may target:
  • Shorter programs
  • Cheaper regions
  • Online or hybrid programs with less time spent physically in the U.S.

Be realistic about total costs and avoid overly optimistic salary assumptions that ignore payroll taxes.

Step 5: Parallel Planning – Alternative Pathways and Exit Options

Given an increasingly tight U.S. immigration and work environment, maintain backup plans while pursuing OPT.

Possible alternatives:

• Employer‑sponsored visas (e.g., H‑1B) if employers will sponsor you.
• Remote work for U.S. or global companies while living in a lower‑cost country.
• Returning home after OPT or immediately after graduation if finances don’t add up.
• Exploring other countries’ post‑study work visas with simpler or cheaper tax rules.

The OPT Fair Tax Act does not eliminate the OPT route; it makes the financial side less favorable. For some students, U.S. experience will still be worth it; for others—especially those with large loans—higher taxes may push them elsewhere.

Step 6: Tracking Policy Changes and Protecting Yourself

Because the bill is pending, staying informed is essential.

Practical steps to stay updated:

• Follow official sources:
  • The U.S. Congress website for the status of S. 2940
  • Official USCIS and IRS pages
• Monitor trusted immigration news:
  • Sites like VisaVerge.com break down how new bills affect students and workers
• Use university resources:
  • International student offices often post updated guidance on taxes, employment, and visa rules

Revisit your plans if:

• The bill advances or is amended
• Your employer changes hiring policies for OPT workers
• Other countries introduce better post‑study options

Key takeaway: There is no single right answer for every student. By treating the possible 7.65% FICA cost as real in your planning, talking early with employers, and watching S. 2940’s progress, you and your family can make calmer, better‑prepared decisions about whether, when, and how to build your career in the United States.